Permanent fix of U.S. housing to take time: Home Depot CEO

NEW YORK (Reuters) - The U.S. housing market is starting to thaw, but it could be two years before a full-blown recovery takes hold, Home Depot Inc Chief Executive Frank Blake said on Thursday.

The world's largest home improvement retailer has seen the benefits of the nascent U.S. housing recovery as professional contractors have started buying more in recent months.

"It's starting to recover, but we're a long way away from true recovery," Blake, 63, told Reuters in a wide-ranging interview that touched on his views of the so-called Fiscal Cliff to why he sees the internet as Home Depot's next frontier.

The comments came less than a week after two influential Federal Reserve officials blamed the disappointing rebound in U.S. housing for continuing to trip up the country's overall economic recovery.

"This housing market's been very, very bad and it's going to take some time to recover," Blake said.

A bubble in the U.S. housing market was at the core of the 2007-2009 financial crisis, which started the same year that Blake became CEO. During the housing downturn, Home Depot's sales at established stores fell more than 20 percent in markets such as Florida and California.

"The way we look at it is there's going to be a period of a workout, a fine period of one to two years and then you're going to get a more robust recovery," Blake said.

Credit availability and the overhang of distressed housing are among the reasons the housing market can't "just spring back" to where it was before the recession, Blake said.

While California and Florida, states slammed by the housing downturn, show signs of improvement, Blake urged investors not to read too much into the recent signs of recovery.

"We've had head fakes on the housing market coming back, so you always worry that this is a little bit of a head fake," Blake said.

One way to tell the difference is whether or not consumers will again look at a home improvement as a cost they can recoup when they sell their home.

"The fundamental question asked in our business is does our customer think about a granite countertop as an expense or an investment?" he said.

TAKING THE ONLINE ROUTE

As it looks for new areas of growth, Home Depot plans to concentrate on building its Internet business rather than overseas expansion, Blake said.

Last month, Blake decided to close all seven of Home Depot's big box stores in China after a failed expansion attempt there. He said he views online business as the next area of expansion, rather than new geographic markets.

"Home Depot can afford not to be in Brazil. Home Depot can afford not to be in, name your country. Home Depot cannot afford not to be the best, what we call, inter-connected retailer in our space," said Blake.

The retailer, which bought California-based Red Beacon earlier this year, is interested in making more acquisitions in Silicon Valley to boost its online business and other related capabilities, Blake said.

Even in China, the retailer has already started selling goods on website 360buy.com and is looking for opportunities to partner with other e-commerce sites.

FISCAL CLIFF

Blake said he had not yet seen U.S. shoppers holding back from spending because of fears of the looming "fiscal cliff." That is Washington's self-imposed year-end deadline to agree on a plan to shrink the federal budget or trigger $600 billion in spending cuts and higher taxes.

"We don't see that in consumer behavior," Blake said.

He was less confident when asked if he thought Washington will find its way through the crisis.

"You never want to get too deep into a bet on the rationality of Washington," Blake replied.

(Additional reporting by Phil Wahba and Brad Dorfman; Editing by David Gregorio and Andre Grenon)